What is the AIFMD state of play?

With just over eight weeks to go before the AIFMD transposition deadline, Sebastien Danloy (pictured), Head of Investor Services Europe and Offshore at RBC Investor & Treasury Services, comments on late implementation and its effects on asset managers…

The clock is ticking. Member States have until July 22 to transpose the Alternative Investment Fund Managers Directive (AIFMD) into their national law, but concerns remain over whether they and asset managers will be ready in time. The AIFMD, now just three months away, will usher in a new era for alternative investments by introducing a harmonised framework across the European Union which puts investor protection and transparency at its core. Following a protracted process in Brussels, however, the European Commission did not publish the final text until late December, several months later than expected. This has made it difficult for government and market participants to prepare for the new regime.

Late take-up of AIFMD – whether by Member States or asset managers – would harm the effectiveness of the new framework from the first day. Given this environment, there are two ways the European Commission could alleviate the pressure.

First, asset managers could be granted additional time to implement the AIFMD if the current deadline becomes obviously unfeasible in the months ahead. This has been suggested by the European Fund and Asset Management Association, which believes that July 22 is too ambitious, and that it would be preferable for fund houses to have an extra six months to prepare.

This is because asset managers offering alternative funds must revisit existing delegation arrangements, as well as review resources they have in place across key jurisdictions where they domicile or distribute their products. In addition, to comply with the requirements of AIFMD, they must select a depositary partner – a first for most hedge fund managers.

Alternatively, the European Commission could grant Member States a similar extension in transposing the Directive into their national laws.

Luxembourg and Ireland have both stated their intention to be among the first to implement the directive in order to help the industry be ready ahead of the July deadline. But according to our latest update, neither has yet to transpose the Directive into their national law and earned a green light on our heat map monitor.

Meanwhile the French regulator, l’autorité des marchés financiers (AMF) has published a guide to help firms to comply with AIFMD. This comes as French alternative fund managers embark on the first stage of applying to the AMF for an alternative investment fund manager operating licence.

While these are positive steps, the parliamentary time and resources of many Member States are often being diverted to deal with more pressing issues such as the difficulties in the Eurozone.

Moreover, the European Securities and Markets Authority is still developing technical standards for co-operation agreements between Member States and supervisory authorities from outside the European Union. These agreements will need to be signed by the deadline for AIFMD transposition so groups based in third countries can operate under the regime.

The combination of all these factors makes it sensible to ask questions on the ability to successfully implement AIFMD in time. Ensuring that both asset managers and Member States were given enough time to adequately prepare for the arrival of AIFMD would be beneficial to both sides, and ultimately, would ensure the centerpiece response to the financial crisis was implemented and utilized with fairness and certainty across the European Union.